Investors use the market cap to determine how big or small a particular company is.

How market cap is calculated…

Market cap = Shares x stock price
32.69B = 621.29M x 52.62

Market cap is usually divided into 3 groups: small cap, mid cap, and large cap. Classifications can tend to vary by investor. The definitions follow below.

Small Cap. Refers to stocks with market cap less than 2 billion. Potential for most growth; however, institutional and fund investors usually stay away.

Mid Cap. Refers to stocks with market cap between 2 billion to $10 billion.

Large Cap. Refers to stocks with market cap more than $10 billion. Includes the heavy hitters and big players in the market.

When it comes to stocks there are two distinct classes of stock traders, and you should find out the type of the people you are following.

Trader

First, there is the trader. These are people who are looking to quickly move in and out of a stock. This could be just a couple hours, days, weeks or even a few months. It is important to stay up-to-date with current market news.

Traders usually execute trades based on some pattern or imminent company action, but they really have no interest in the long-term aspect of the company.

Investor

An investor is something similar to what people call “buy and hold” traders. They will find companies that are bound to grow, and may never touch their shares till over a year. They do not care about the short-term aspects of the company and do not need to boggle their minds with daily market activity.

Which One Is Best For You

There is really no right or wrong type of stock trader; however, it is really which type of trading is right for you. You can make a great amount of money either way; however, you must consider your time frame, risk, and how much work you want to put into it.

While traders can make more money much faster, they are required to do more work and monitoring than the typical investor. Determine what type of trader you want to be, and then make sure that the people you are following from have the same goals as you.

Chart Pattern Manifest – Learn how to accurately predict stock price movement and limit risk.

The official definition of an exchange-traded fund is (according to investopedia)

A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold.

Why invest in an ETF?

Like stated at the very beginning of this article, an ETF allows you to increase your diversity, but still trade it like a stock. For example, if you like the financial sector, then why pick just one stock to invest? You could find an ETF that traces the gains and losses of a collection of financial stocks. That way you are not required to pick the winner out of the group.

It seems like there are ETFs that cover almost every sector and index now. You can see a full list of ETF’s over at Yahoo’s database and 40 Great Inverse / Short ETFs For Bearish Investors. There is also a form called a leveraged ETF, which makes 2 to 3x returns of the index its tracking.

You might also be curious in check out how trade triangles can help you trade in the ETF markets.

Quick example: You buy shares of Stock X at $20. The stock goes down to $10. In order to try and limit your risk and losses, you buy the same amount of shares of Stock X at $10. Now your shares of Stock X is $15.

As you can see from the example above, you essentially bought more shares of Stock X to try and hedge your losses. While it is a common practice, many traders have various opinions on whether is a good or bad thing to do.

By obviously look at the end picture, we can come to conclusions. Yeah, if Stock X makes it way to $30, then averaging down was a great thing to do. What if it went down to $5? Because you wanted to average down, now you invested more capital into a still sinking stock. Are you going to average down again? What if Stock X goes to $3?

You can see that there are two distinct outcomes of averaging down. The positive and the negative. The debate about averaging down is when do you consider the trade a loss and get out?

When you initially bought your second round of shares at $10 you instantly added more capital into that holding. That is cash that can’t do anything. Yeah, if it goes up good, but what if it continues to go down? Will you sell, average down again, or just hold?

If you sell, now you incur the losses from both rounds of shares. If you average down again you are now taking on more risk. Think of it like a bet. You lost the first time, so you now offer double or nothing. Lost again, so now you offer triple or nothing. When will you consider enough is enough? Finally, what if you decide to hold? With your first attempt at averaging down, you put more money into the stock because you felt it would go up. When will you consider the trade a bust?

Kind of bringing this back to the debate, whether this is a good or bad idea? It really depends on your strategy? Are you investing in the company or just playing the stock game?

If you are investing in the company, then you did your research and have a good feeling of what should happen with the stock.

If you are just playing the stock game and feel the stock should go up higher sometime, then why waste time. Minimize your losses, get out, and move on to the next stock.

What do you think about averaging down?

The following are a list of some of the more popular stock ordering options that are available to traders.

Market Order - Choosing market for the order type indicates you wish to seek an immediate execution for your order at the current market price. By using this type of market execution, you are letting the price of action being determined by your broker. While these orders are easy to use, there is a downfall. Because you do not specify a stock price, technically the purchase price could be anything.

Limit - Choosing limit for the order type indicates you wish to seek the purchase or sale of a stock at a specific price or better. Unlike market, limit orders allow you to lock in the stock at your specific price.

Stop Market – Choosing stop market for the order type indicates you want your stop order to become a market order once a specific price has been reached. For example, if stock x sits at $20 and you want to buy it once it passes $22, then your stock market order would be set at $22.

Stop Limit – Stop limit is a combination of stop market and limit orders. Once the activation price is set, then your limit order goes into effect.

Trailing Stop – Trailing stops are protective orders. They are usually used as a form of stops to protect profits. By choosing some percentage points or actual dollar figures, the trailing stop will move with your order and execute trade when criteria is met.

Broker Center – Find the stock broker that meets your needs.

Bull – A bullish sentiment, trend, or market symbolizes an upward movement. A bullish market means that stock prices are going higher. A bullish trader feels positive about stocks getting higher. A bullish sentiment is usually related to a trader finding some sort of pattern or data that is common in most stocks that end up going higher.

Bear – To make things real simple, a bear is the complete opposite of a bull. A bearish market means that stock prices are going lower. A bearish trader feels stock prices are going to get cheaper. A bullish sentiment is correlated with data or patterns that are usually apparent in other stocks that headed lower.

Pig – While not an official term,  being called a pig in the stock market is not a good thing. It usually means that you have no clue what you are doing, and just blindly make and execute trades.

Bull vs Bear

While there may be no real connection between bears feelings and bullish sentiments in the market. A common rule of thumb is that once one side has completely abandoned the market then a reversal is more than likely.

For example, if stock prices are getting higher and higher and we are experiencing a bull market, then once all the sellers (aka bears) are gone, then prices will probably head lower. Obviously once too much of something happens, then eventually it won’t  work anymore. Think of the real estate market: overdeveloping equals a change in market and demand.